Research from the Society of Trust and Estate Practitioners (STEP) suggests that families managing a loved one’s money may be committing financial abuse without realising it. The research suggested that a lack of understanding as to what the role of an attorney is can often cause well-meaning family members to unintentionally cross the line into financial abuse.
Understanding the role of an Attorney
Attorneys appointed under a Lasting Power of Attorney for Property and Finance (an “LPA”) can make decisions on behalf of the person who granted the LPA (known as the “Donor”) when the Donor lacks capacity, or with the Donor’s permission when they have capacity. Decisions about health and welfare are dealt with under a different type of Lasting Power of Attorney.
Registering and using a Lasting Power of Attorney
The LPA must be registered with the Office of the Public Guardian before it is used, and the LPA itself may contain restrictions on what the attorney can do.
Acting in the donor's best interests
Decisions made under an LPA must be made in the Donor’s best interests. This is not always as simple as it sounds. Section 4 of the Mental Capacity Act 2005 (the “Act”) sets out how to go about making a decision in the Donor’s best interests. The attorney is under a duty to consider various matters, including:
- the Donor’s past and present wishes and feelings (including any written statement made when they had capacity);
- the beliefs and values that would likely influence the Donor’s decision if they had capacity; and
- the other factors that the Donor would be likely to consider if they were able to do so.
This is not an exhaustive list, and there are other relevant provisions under the Act which the attorney may need to consider.
Making gifts under an LPA
One of the areas where people get it wrong is when attorneys use an LPA to make gifts. Attorneys should be aware that, aside from the general duty to make decisions in the Donor’s best interests, there are also restrictions on using an LPA to make gifts. Section 12 of the Act allows attorneys to make gifts on behalf of the Donor in the following very limited circumstances:
- on customary occasions (meaning birthdays, the anniversaries of marriages / civil partnerships and other occasions when gifts are usually given), to relatives and other people connected to the Donor; and
- to any charity to which the Donor made or might have been expected to make gifts.
In each case the value of the gift must be reasonable in all the circumstances, and in particular must be reasonable having regard to the size of the Donor’s estate.
When court approval is required
Gifts that fall outside of these two exceptions must be authorised by the Court of Protection. There is no exception allowing attorneys to make loans (to themselves or others) from the Donor’s funds, and any loans that aren’t authorised by the Court of Protection will be treated as unauthorised gifts. This can come as a surprise to attorneys, who often feel that there is nothing wrong with making a gift or loan that the Donor would have wanted them to make, particularly if they did it in the past when they had capacity.
What happens if an attorney gets it wrong?
If an attorney is not acting properly, for example making unauthorised gifts from the Donor’s funds to themselves or others, then concerns can be raised with the Office of the Public Guardian, who have
the power to investigate and to ask for an explanation of the financial transactions. Applications can also be made to the Court of Protection for attorneys to be removed and replaced.
If you are concerned that an attorney is not acting properly, or if you are an attorney looking to understand your duties, then please get in touch and a member of our specialist team will be happy to speak with you.